Continuing public concerns over high-priced hepatitis C drugs are taking a new twist as Louisiana’s top health official proposes using an obscure federal patent law to get the medicines at a much lower cost. If successful, other states could reap the benefits.
Covering treatment for the 35,000 uninsured and Medicaid-
dependent residents with hepatitis C would cost the state $764 million given current drug costs, a staggering sum that would have to be pulled from schools, public services and infrastructure programs. Louisiana’s budget runs to $31.2 billion a year, but its discretionary programs, such as health care, account for $3.6 billion.
“We don’t have the resources,” said Rebekah Gee, the state’s health secretary.
Gee wrote to one of the nation’s leading public health experts last month to explore tapping a 1910 patent law that gives federal regulators the power to appropriate inventions and use a product in the interest of the public good. In the 1960s and early 1970s, the Defense Department used the law to buy dozens of medicines at lower costs.
Joshua M. Sharfstein, an associate dean at the Johns Hopkins Bloomberg School of Public Health, took Gee’s query to other top academic and legal health specialists. Their meeting ended with the group concluding that Louisiana should pursue action under U.S. Code Section 1498.
“This is the path that would be the most viable to be able to get what you need for people in Louisiana,” said Sharfstein, a former deputy commissioner at the Food and Drug Administration.
Under the law, the Trump administration could sidestep patents and contract with a generic supplier to provide a lower-priced version of expensive antiviral drugs such as Sovaldi and Harvoni, which are made by industry leader Gilead Sciences.
The government would have to pay the drugmaker only reasonable compensation and prove, per the statute, that using the product benefits the government. A favorable ruling for Louisiana would mean the strategy could be used by any state.
Gee, who also is working more broadly to raise bipartisan support to force a change in hepatitis C drug prices, said she thinks using the patent law could be a “win-win” for the state and industry.
“Pharma needs to think about different approaches to profitability,” she said. “Sometimes quantity can be an important driver of profit, not just the price of each unit of this drug.”
Her proposal would need approval from Health and Human Services Secretary Tom Price, who oversees the federal agency that administers Medicaid. During his confirmation hearings, Price said he would be committed to making certain that drug prices “are able to be afforded by individuals.”
Price’s record from his years in Congress and as a Georgia state lawmaker indicates that he believes government influence should be reduced in health care. During his confirmation hearing, he praised a Medicare Part B program that allows pharmacy benefit managers to negotiate drug prices.
Rachel Sachs, an associate professor of law at Washington University in St. Louis who attended the recent Johns Hopkins meeting, said she believes “the case is strong” in invoking Section 1498, even though pharmaceutical companies may have multiple patents and exclusivity periods to protect their drugs.
“The federal government has a direct financial interest in controlling hepatitis C,” Sachs said, noting that many of those infected are covered by public programs such as Medicaid or through state prison systems.
The trade association Pharmaceutical Research and Manufacturers of America declined to comment on the potential use of the law. Gilead did not return calls for comment.
The high prices of hepatitis C drugs have been an ongoing concern for public health officials across the country. In 2015, the federal Centers for Medicare and Medicaid Services said states should not unreasonably restrict coverage of treatments for people with the disease. Last year, the National Association of Medicaid Directors asked Congress to act, calling hepatitis C a “pervasive public health threat.”
Hepatitis C infections, which spread through blood or other bodily fluids, are usually silent for many years until the virus damages the liver enough to cause symptoms such as jaundice and fatigue. An estimated 2.7 million Americans now have chronic hepatitis C.
Through its Medicaid program, Louisiana covered Sovaldi and Harvoni for 324 people last year at an average cost of $85,000 each. Treating more of its infected Medicaid population would be prohibitive for the state without lower-priced drugs, according to an online budget allocator tool created by Peter B. Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center in New York.
Using estimates of drug costs from Gilead’s public filings, the tool shows how millions of dollars would need to be shifted in the state’s discretionary budget to pay for those treatments. For instance, cutting K-12 funding by $26 million would cover treatments for 3,176 hepatitis C patients. Too often, Bach said, discussions about costs do not illustrate the trade-offs. “These numbers are so large that it’s very difficult to think about them proportionately,” he said.
Boston patent lawyer Hannah Brennan, who co-authored a 2016 paper on Section 1498, told those at the Hopkins meeting that the Defense Department’s medical-supply agency relied on the law during a three-year period in the 1960s to procure 50 drugs for $21 million in savings. In one example, the government obtained the antibiotic nitrofurantoin for nearly four times less than the patent holder’s price. In the 1970s, Brennan said, use of the law for purchasing medicines petered out, probably because of pharmaceutical lobbying and greater attention to patent protection.
But that has not stopped other agencies, including the National Gallery of Art and the U.S. Army Corps of Engineers, from tapping Section 1498. Brennan’s paper notes that the government routinely relies on the patent law to act in the public’s interest for inventions ranging from electronic passports to genetically mutated mice.
In 2001, Health and Human Services Secretary Tommy Thompson threatened to use the law to gain a lower price on the Bayer drug Cipro, an antibiotic that also is given to people exposed to anthrax. The agency and the company later reached a deal.
Now, 16 years later, health experts are working with Gee to craft a Section 1498 proposal on hepatitis C drugs.
“This is exactly the moment and exactly the kind of scenario” for doing so, Memorial Sloan Kettering’s Bach said.
Kaiser Health News, a nonprofit health newsroom whose stories appear in news outlets nationwide, is an editorially independent part of the Kaiser Family Foundation.